There are a slew of phase I/II trials going on right now in the stem cell sector that could change the lives of millions of people. The biggest companies are never directly involved in these as they tend to be much more conservative with their cash hoards and stick with what works. The picture as I see it is that Big Pharma is letting the small speculative stem cell companies do the dirty work, bleed the cash, and grease the bureaucrats, while they wait to see which company shows the best results, if any.
In the past, significant success in phase II has attracted the attention of large companies offering buyouts as was the case with Amgen (AMGN) with Biovex in 2011, and in other cases an offer to shoulder the costs of phase III trials in exchange for future revenues. Either case is a dream for shareholders of these development stage companies, though phase II results will have to be quite impressive for Big Pharma to venture into the highly stigmatized stem cell sector. What follows is a list of companies, their respective ongoing phase II trials and estimated timelines, and implications for shareholders. Regarding whether any of them will catch the attention of big pockets, use the data here to hazard your own guess.
Stemcells Inc. (STEM)
Stemcells Inc. has two pivotal trials going on right now, one more crucial in the midterm than the other. The first is a phase I/II trial for HuCNS-SC (human central nervous system stem cells) enrolling 12 patients and estimated to be complete by March 2016. The latest news with this trial came out in mid February when 2 of 3 patients with thoracic spinal cord injuries treated with HuCNS-SC reported sensory function below the injury site. One patient's injuries was reclassified as "incomplete" from previously being "complete". The news caused a jump in STEM shares, which has since abated. This should be expected considering the trial is in such early stages that any lasting effects on the stock price will be nil, though potentially good trading opportunities.
The second, and in my view more important trial is for dry age-related macular degeneration (AMD). Currently , there is no approved treatment for this disease which affects as many as 11 million people in the U.S. alone, so the market is quite large. This trial is currently recruiting with a target of 16 patients, and completion date is estimated at March 2014, or one year from now. One company that may be watching this trial is Regeneron (REGN), which broke through to the big leagues with its wet macular degeneration drug EYLEA, which sold $838M in 2012. Wet MD diagnoses account for one tenth of all MD cases in the U.S.-- just to get you an idea of the potential sales bonanza an approved dry AMD drug could bring.
Stemcells has burned approximately $25M a year for the last three years, and this doesn't show signs of stopping any time soon. The company's debt, however is extremely low at under half a million, which gives it substantial staying power to get through these trials. There is still a long, long way to approval from there. I see no substantial sustained movement in the stock until 2016, barring any buyout offers if phase II for dry AMD succeeds with flying colors. We'll know that in about a year.
The technical picture for STEM over the past year is stable. Last July the stock jumped from $.87 to a high of $2.40 in October on news that its stem cells restore memory in models of Alzheimer's disease. Since then it has been in a trading range from $1.40 to $2.40. The fact that STEM has not dropped back down to below its breakout price for 8 months now suggests that the stock will hold this range for another year until phase II results are released.
Athersys is in a strong position for attracting the attention of big players. The company has already partnered with Pfizer (PFE) back in 2009 for milestone payments on its ulcerative colitis trials. Ulcerative colitis, classified as an autoimmune disease, has an incidence of anywhere between 1 to 20 cases per 100,000 in the U.S., so numbers are a bit fuzzy as it is a difficult disease to diagnose. In any case, Athersys' phase II trials are currently enrolling, and study completion is estimated at March 2014 as well. Enrollment will be about 128 patients, so this is a much more advanced phase II.
Another advantage of Athersys is that its stem cell system Multistem gets around the problem of immunosuppressive therapy and tissue matching, virtually ensuring that cells are not rejected by the host patient. Annual cash burn is about $13M, Pfizer holding its hand, cash of about $8M and virtually no debt. The company will get through these trials. If the trials succeed, Pfizer could ask to run the whole show.
Annual results released on March 11 show a $14.7M loss, but a healthy balance sheet with over $25M in cash and very low liabilities, thanks to a dilutive $21.2M financing in October. ATHX has since regained its dilutive losses which brought it down to as low as $.95 and has found support at around $1.50. Being that its cash on hand will handily get the company through its phase II results due in a year's time, I see that support holding at least until then. From that point, it all depends on the results of the trial.
Advanced Cell Technologies Inc., (OTCQB:ACTC)
There are a number of things about Advanced Cell Technologies that can catch an investor's eye. The critical month for ACTC is fast approaching - January 2014, when its Stargardt Syndrome phase II trials are estimated for completion. Stargardt is a disease similar to dry AMD, though its onset is much earlier and is caused by a genetic mutation. ACTC is injecting stem cells into these patients' retinas, and positive results will likely have positive implications for its own dry AMD trials which are a little behind Stargardt in the pipeline, aiming for a July 2014 completion date. The treatments for the two diseases are basically the same thing - injecting stem cells into retinas, so the first half of 2014 will be crucial for Advanced Cell.
On the financial front, Advanced Cell got over a significant hump in 2011 when it paid off over 90% of its $28M debt load. Also noteworthy is that its cash burn rate has dropped off significantly. 2011 showed negative cash flows of $73M. This year the company has lost less than $29M. With over $7M in cash, very low debt, and the next milestone about 10 months away, ACT has the flexibility to finance itself via a loan and not necessarily another dilution to get itself through phase II. The stock is sitting at 7.6 cents a share, but expect that to rise as phase II results get nearer and the hype builds. I see more than one company showing interest in at least helping ACT through the final phase III if phase II succeeds.
Every company has its way of obtaining and growing stem cells. Pluristem's is placental, meaning its stem cells come from full term human placentas or afterbirths, otherwise considered medical waste. There are two positives to this approach. The first is there are no moral objections to harvesting stem cells from afterbirths. Second, like Athersys' Multistem system, there is no need for tissue matching. Pluristem calls its system PLX.
There are currently two phase II trials on file at clinicaltrials.gov that Pluristem is recruiting for. The first is for PLX treatment post hip replacement surgery to rehabilitate the gluteus medius muscle tissue. The gluteus medius is what is commonly known as the love handle, which surgeons have to slice through in order to perform the surgery. The American Association of Hip and Knee Surgeons claims that 800,000 hip and knee replacement surgeries were performed in 2003, so whatever the number of hip replacements in 2012, there will be no shortage of customers.
The procedure simply requires an injection of PLX stem cells into the muscle which could help chronic post surgical problems with movement and quality of life. The phase II has an estimated primary completion date of March 2014.
The other phase II Pluristem is running is nearly two years behind at December 2015 so it is less relevant in the near term. The trial is testing PLX for the treatment of intermittent claudication, or atherosclerosis in the lower extremities that causes pain during exercise, usually in the legs. It is estimated that the condition affects 5% of the population. This will become important next year, but for now, love handle repair is more crucial for the company.
Cash burn rate for Pluristem is a little over $4M a quarter over the last 4 quarters with $23.5M in cash, $41M in short term investments and zero debt, so the company has plenty of time and is very well capitalized for the foreseeable future.
PSTI has been on a strong uptrend since November 2008 when it hit 30 cents (it is now over $3.00) and actually seems to move with the rest of the general biotech market in terms of price action. This is probably because it has more money than most development stage biotechs. If March 2014 phase II results treat it well, Pluristem will continue its uptrend. If not, the stock will get hit of course, but even so it has the money to coast easily until December 2015.
All things considered, the first half of 2014 will be absolutely critical for Athersys and Advanced Cell, two companies that have a real shot at success if phase II trials show positive results. While Athersys has already struck a deal with Pfizer, Advanced Cell will be the first to show its results for Stargardt at around the beginning of next year. Athersys will be right behind in March for ulcerative colitis. Pluristem is in a different situation and while March results for PLX will have a large impact on PSTI shares either way, it is not do or die for Pluristem. As for Stemcells Inc. results are still a long way off. Don't hold your breath.
Bottom line, ACTC phase II will probably come in first and set the tone for the rest of the stem cell industry. Athersys and Pluristem will follow a couple months later. Stay tuned.